The Spanish government has agreed to extend the country’s emergency paid leave schemes for an additional three months to the end of September — a costly measure that business and unions say is essential to prevent the widespread collapse of companies and job destruction, the Financial Times reported. The temporary schemes, known as ERTEs, had been due to expire on June 30 and currently cover more than 2m people who hope to return to their jobs as the crisis eases but who are far from sure of doing so.

Wirecard collapsed on Thursday owing creditors almost $4 billion after disclosing a gaping hole in its books that its auditor EY said was the result of a sophisticated global fraud, Reuters reported. The payments company filed for insolvency at a Munich court saying that, with 1.3 billion euros ($1.5 billion) of loans due within a week its survival as a going concern was “not assured”.

Fitch Ratings treats some amend and extend (A&E) exercises initiated by stressed corporate borrowers as distressed debt exchanges (DDEs), eventually leading to restricted defaults (RDs), Fitch Ratings reported. Since the coronavirus pandemic began affecting Europe in March 2020, Fitch has classified 11 transactions in its EMEA bond and loan portfolio as DDEs, which will contribute to default rates rising towards 4%-5% by end-2020 from 1% in 2019.

Investors are concerned that adjustments to earnings made during the Covid-19 pandemic are becoming too aggressive as borrowers keep earnings artificially high to avoid covenant defaults and delay the onset of restructurings, Reuters reported. Borrowers are adjusting earnings as if the crisis had never happened, known as earnings before interest, tax, depreciation, amortisation and coronavirus (Ebitdac), or “earnings before coronavirus.” “Companies may be keeping earnings artificially high in order to avoid a financial covenant breach.

McLaren is worried it may soon run out of money. Although the famous British team has signed up Daniel Ricciardo for 2021, McLaren has now said in a filing at London's High Court that it needs a ruling "to ensure that the Group can continue as a going concern into 2021,” Grandprix.com reported. The company has already laid off a quarter of its workforce, and now it is suing to have the security in its factory and historic F1 car collection released in order to raise over $300 million in loans.

Lufthansa has drawn up a plan to avoid insolvency should a shareholder vote on Thursday fail to approve a $10 billion government bailout, a company source told Reuters on Wednesday, Reuters reported. The German government could still get a 20% stake, as originally envisaged. But under the new plan this would happen in two steps, without the need for shareholders’ approval, the source said. Germany’s flagship airline has been hit hard by the COVID-19 pandemic and what promises to be a protracted travel slump, and has sought a state rescue to avoid insolvency.

The UK accounting watchdog is set to announce an investigation into the three auditors of collapsed investment business London Capital & Finance, according to people familiar with the situation, the Financial Times reported. Big Four accountants EY and PwC, as well as Oliver Clive & Co, a small London-based firm, each signed off LCF’s books for three years before it went into administration in January 2019, in a high-profile scandal related to the mis-selling of mini-bonds.

More than £28bn has been lent to the UK’s smallest companies to help them through the coronavirus pandemic, with the number of state-backed “bounce back” loans continuing to rise sharply despite the easing of lockdown restrictions, the Financial Times reported. The Treasury on Tuesday said that almost £2bn of these light-touch loans had been taken by so-called micro businesses in the past week alone, with the total number of businesses that have used the business bailout scheme standing at more than 921,000.

Rising French corporate debt could leave firms struggling to survive and saddle banks with dud loans, the central bank said on Tuesday in its biannual financial risk report, Reuters reported. French companies went into the coronavirus crisis with debt already at record levels, topping 72% of gross domestic product at the end of last year, according to the Bank of France. A nearly two-month coronavirus lockdown left many with little choice but to tap state-guaranteed bank loans as their cashflows all but dried up, providing short-term relief by adding to their debt burdens.

JD Sports on Tuesday appointed Deloitte as administrator for its loss-making outdoor clothing chain as it bought back assets of the unit in a pre-pack administration deal, Reuters reported. Go Outdoors, which JD first bought for 112 million pounds ($140.19 million) four years ago, has struggled with significant losses as sales declined at its 67 stores, and JD had been exploring options for the division while the coronavirus lockdown mounted further pressure.